Higher or No Hire? Don’t Forget This Minnesota Law When Working with Staffing Agencies – Who Is My Employee?

I searched in Apple Music for songs titled “Higher,” and it’s a pretty common song title. There are songs called “Higher” by Creed, Tems, Citizen Cope, TEC, burns Boy, Rihanna, DJ Khaled, Lemaitre, Chris Stapleton Michael Buble, Eminem and more. I stopped the list because you get the idea. If you want “Higher,” just search for songs, and you’ll have many to choose from.

But if instead you want “Hire,” and you’re in Minnesota, your options are much fewer. Or, actually, your options are much fewer if you want “No Hire.” Let me explain.

A Minnesota law enacted last summer bans service providers, including staffing agencies, from doing anything to “restrict, restrain, or prohibit” the hiring of its employees or independent contractors. That means a clause prohibiting direct hire is no longer allowed. The law also bans clauses that would prevent soliciting such workers for direct hire.

The law took effect July 1, 2024, and it applies to earlier contracts too, rendering these clauses void.

There are a few limited exceptions, such as for vendors providing professional business consulting for computer software development. But that’s a pretty narrow lane to try to drive your truck through. Reminds me of some tunnels I drove through in Northern Italy last fall. Not much room to maneuver. Especially when there’s a bus in the tunnel. They shouldn’t let buses in those tunnels.

A possible workaround is to impose direct hire fees, but those fees may be seen as “restrict[ing]” or “restrain[ing]” hiring. It’s unclear whether Minnesota courts will view direct hire fees as an unlawful restriction or restraint under this new law.

If your business provides or uses staffing services in Minnesota, check your contract. Same thing for contracts with other vendors who supply labor, such as consultants. If the contract prohibits direct hire of the vendor or staffing agency’s employees, that clause is probably now void.

And there are no good songs about laws that void contract clauses. I checked.